A market warning: Why bond manager Robert Kessler advises extreme caution ahead.
WEALTHTRACK Episode #1435; Originally Broadcast on Febraury 16, 2018
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- Founder, CEO,
- Kessler Investment Advisors
What’s to blame for the sea change that has occurred in the financial markets recently: the spike in volatility, the first official stock market correction in two years and a rise in formerly placid long-term interest rates?
The almost universal answer from Wall Street is that the disruption in the financial markets has been caused by an acceleration in global growth, a pickup in inflation from abnormally low levels and the withdrawal of years of stimulus from major central banks.
And there is another factor at work in the U.S., the huge expansion in government spending. The recent 2-year budget deal adds nearly $300 billion to government spending. By some estimates the Treasury will need to issue more than a trillion dollars in bonds a year to cover the burgeoning federal budget deficit.
Is this just one more reason to avoid U.S. Treasuries? Financial luminaries such as Warren Buffet, former Fed chairman Alan Greenspan, and current and former so-called bond kings Jeffrey Gundlach and Bill Gross would say, yes. At various times in recent years they have all called bonds, including Treasuries, extremely expensive if not downright dangerous investments.
Not so this week’s guest. He is Robert Kessler, Founder and CEO of Kessler Investment Advisors, a manager of fixed-income portfolios with a specialty in U.S. Treasuries for institutions and high net worth individuals globally. For years Kessler has been correct in predicting interest rates would fall and stay low and also in recommending Treasuries for their investment potential and safe haven characteristics. What’s his view now? We’ll find out.
As always, this week’s program is available to ourPREMIUM subscribers right now. Our exclusive EXTRAfeature with Robert Kessler addresses risk and how his regular rock climbing expeditions have influenced his investment perspective.
Thank you for watching. Have a great weekend and make the week ahead a profitable and a productive one.
CONSIDER BUILDING A LADDERED TREASURY BOND PORTFOLIO ONLINE AND FEE FREE
Buy a series of bonds that mature at different times
TREASURY BOND LADDER
- Bottom rungs – short-term maturities (1-2 years)
- Middle rungs – intermediate (5-7 years)
- Top Rungs – long-term (10-30 years)
- Diversify interest rates
- Insulate portfolio from ups & downs
- Keep up with interest rate changes
- Get stable income
TO BUY NEW TREASURY ISSUES:
2, 3, 5, 7, 10 & 30 year maturities
- Minimum investment $100
- Interest is paid semi-annually
- Free from state & local taxes
No Bookshelf titles this week.
Buy and hold a long-term U.S. Treasury Strip
(Also known as a Zero-Coupon Treasury Bond)
- Stripped of interest payments
- Sells at deep discount
- Pays full principal at maturity
No stock mentions in this episode.[/tab]
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Robert Kessler from the WEALTHTRACK archives:
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Bond manager Robert Kessler is an avid and serious rock climber. What difference has being up close and personal in this high risk sport made in his investing?